Governance of Export Channels to

colorfuleggnogSoftware and s/w Development

Feb 17, 2014 (3 years and 7 months ago)

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Governance of Export Channels to
Eastern Europe:


Impact of Market Characteristics on
Business Performance

Cristian Chelariu, York University

Daniel C. Bello, Georgia State University

David I. Gilliland, Colorado State University

Environment in Transitional Economies

Central

Planning

Market

Competition

Poor infrastructure

Obsolete production facilities

Need for institution building / law enforecment

Unstable political environment

Unethical business climate

Few local firms with Western business skills

Sampled Export Country
-
Markets


Russia



40%


Poland



20%


Czech Republic

9%


Hungary


5%


Less than 5% of sample:


Romania


Bulgaria


Baltic (Estonia, Latvia, Lithuania)


Slovakia, Slovenia


Others from former Yugoslavia, Kazahstan,
Ukraine

Environmental

Uncertainty

Export

Channel

Governance

Performance:

Market

Development

Goals

Environmental Uncertainty

Unanticipated changes in circumstances
surrounding an exchange

Williamson 1981

Fundamental Facets:


Volatility


Munificence


Complexity

Sharfman and Dean 1991

Market Volatility

Unexpected change reducing
partners ability to predict outcomes, renders
agreements incomplete

Demand Munificence

Certainty that potential
for product is & remains high

Regulatory Complexity

Diversity of trade
regulations & institutions implementing trade
rules

Market Development



Not just sporadic export sales



Systematically developing Eastern
European market for exporter’s brand



Increasing Operational Interdependence


Increasing Non
-
market governance


Operational Integration Continuum

Discrete

Increasing Operational
Interdependence

Joint Action

by exporter

& importer

Operations interdependent and complex

Exporter

Importer

Sets wholesale price

Designs products

Calls on F. customers

Attends Trade Fairs


Pre
-
sale market analysis & promotion

Modified product for local conditions

Salesforce training, Post
-
sale services

Joint Actions

Complexity requires Governance

Operational

Interdependence

Non
-
market

Governance

Mechanisms

Governance resolves increasingly complex decisions


Resource allocation


Role responsibility


Operational issues

Governance


“the approach employed by parties to
organize and regulate exchange conduct”

Unilateral:

One partner establishes rules &
rewards to elicit compliance by target

Bilateral:

Parties collaborate & share
control based on mutual interests

Heide 1994

Gundlach 1994

Research Questions


Does intensified governance improve
business performance?



Do facets of uncertainty intensify
governance?



Does governance mediate the
Uncertainty

Performance relationship?

Market

Volatility


ξ
1

Demand

Munificence


ξ
2

Regulatory

Complexity


ξ
3


Bilateral

Relationalism


η
1

Unilateral

Incentives


η
2



Business

Performance


η
3


Methods


USA export managers; from J. of
Commerce & Dept. of Commerce lists



747 firms phoned; only 353 export to
Eastern Europe



188 questionnaires back (180 useable,
51% response rate)

Volatility

1.
Environment changes Slowly…changes Fast

2.
Stable Environment…Erratic Environment

3.
Certain Environment…Uncertain Environment

(scale: 7
-
point Semantic Differential )


Demand Munificence

1.
In that country, there is a high potential for our products

2.
The customer demand for our product category is increasing in
that country

3.
In that country, the demand in our industry is growing

(scale: 1= Strongly Disagree to 7= Strongly Agree)


Regulatory Complexity

1.
Doing business is complex because many entities (agencies,
courts, bureaucrats) are involved in regulating business

2.
Various government bodies with divergent agendas regulate
business in that country

3.
Doing business is subject to many approvals from a variety of
officials at various levels

(scale: 1= Strongly Disagree to 7= Strongly Agree)

Bilateral Relationalism

1.
Problems that arise in this relationship are treated by the
parties as joint rather than as individual responsibilities

2.
Both parties share in the problems that arise in the course
of our dealings

3.
When some unexpected situation arises, the parties
would rather work out a new deal than hold each other to
the original terms

4.
Both parties are flexible in dealing with each other

Unilateral Incentives

1.
When interacting with our partner, we provide incentives
to motivate our partner to follow our suggestions

2.

We offer specific incentives to our partner to encourage
changes in its marketing and/or operating procedures

3.

We emphasize what we will offer in return for their
cooperation or participation

Business Performance



How effectively do you and your partner

accomplish your firm’s market development

goals in this Eastern European country:


1.

Sales Goals

2.

Profit Goals

3.

Growth Goals


(scale: 1= Very Poor to 7= Very Well)


Linkages in the Model

Hypotheses

Theoretical Model

Number

Sign

Parameter

Estimate

t
-
value

Exogenous


䕮摯来湯畳⁖慲楡扬敳


Volatility


Relationalism

H1a



γ

1,1


.28


2.58


Volatility


Unilateral Incentives

H1b




γ

2,1


.26


2.41


Demand


Relationalism

H2a



γ

1,2

.13

1.55


Demand


Unilateral Incentives

H2b



γ
2,2

.17

2.02


Regulatory


Relationalism


H3a



γ

1,3


.03


0.31


Regulatory


Unilateral Incentives

H3b



γ

2,3

.26

2.46


Demand


Business Performance

.32

4.09

Between Endogenous Variables


Relationalism


Performance

H4a




3,1

.31

4.12


Unilateral Incentives


Performance

H4b




3,2

.16

2.06

χ
2
(140)
= 299.09; GFI= .85; RMSEA= .073; RMR= .063; CFI= .94; TLI (NNFI)= .92

Market

Volatility


ξ
1

Demand

Munificence


ξ
2

Regulatory

Complexity


ξ
3


Bilateral

Relationalism


η
1

Unilateral

Incentives


η
2



Business

Performance


η
3






Implications


Channel management positively
associated with performance



Governance matters; has performance
consequences


Both U, B contribute uniquely

Implications


Volatility weakens B (close collaboration),
U (mfg. incenting)



Uncertain, erratic environments are not
“overcome” by stronger channel
management



Unpredictability a key public policy problem


Implications


Exporter incentive
-
investing in E.
European partner:



Encouraged by demand potential



Encouraged by regulatory complexity


Do exporters rely more on local partner?